Professional Documents
Culture Documents
320el7 PDF
320el7 PDF
Cash Book
Basic Accounting
Notes
CASH BOOK
A person after passing his/her senior secondary examination started a
grocery store. The transactions were limited in number and he/she maintained
only one register to record them i.e., Journal. As the business grows, the
number of business transactions increases. Recording all the transactions
only in the Journal becomes very inconvenient and cumbersome. It needs
to be divided into many books. There are various kinds of books that are
maintained where the transactions will be recorded in these books according
to their nature, such as Cash book for cash transactions, Sales Book for
credit sales; Purchases Book for credit Purchases and so on. Out of these
books, Cash Book plays a significant role because it records large number
of cash items of a business concern. In this lesson you will learn about Cash
Book, its meaning and preparation.
OBJECTIVES
After studying this lesson, you will be able to:
l
state the meaning and draw Simple Cash Book as per format;
state the meaning and draw Cash Book with Bank Column as per format;
prepare Simple Cash Book and Cash Book with Bank column;
ACCOUNTANCY
119
MODULE - 1
Cash Book
Basic Accounting
Notes
On your birthday you got gift in the form of cash from your parents, grand
parents and some of your relatives. In the meantime, you got back some
money that you have given to your friend as a loan. You spent this money
in buying books and clothes. You went to see movies with your friends.
You purchased some toys for your niece. As per habit you noted down all
receipts and payments in your note book. At the end of the month, you
calculated the balance of cash in hand and tallied it with the actual cash
balance with you. You may maintain separate book to record these items
of receipts and payments, this book is known as Cash Book.
Cash Book is a Book in which all cash receipts and cash payments are
recorded. It is also one of the books of original entry. It starts with the cash
or bank balance at the beginning of the period. In case of new business,
there is no cash balance to start with. It is prepared by all organisations.
When a cash book is maintained, cash transactions are not recorded in the
Journal, and no cash or bank account is required to be maintained in the
ledger as Cash Book serves the purpose of Cash Account.
Cash Book : Types and Preparation
Cash Books may be of the following Types:
l
A Simple Cash Book records only cash receipts and cash payments. It has
two sides, namely debit and credit. Cash receipts are recorded on the debit
side i.e. left hand side and cash payments are recorded on the credit side
i.e. right hand side. In this book there is only one amount column on its
debit side and on the credit side. The format of a Simple Cash Book is as
under:
Format of a Simple Cash Book
Dr
Date
120
Cr
Particulars
Particulars
L.F. Amount
(Rs)
ACCOUNTANCY
Cash Book
MODULE - 1
Basic Accounting
Notes
Particulars
In this column, the name of the account in respect of which cash has been
received or payment has been made is written. Account pertaining to the
receipts of cash is recorded on the debit side and those pertaining to cash
payments on the credit side.
Ledger Folio
In this column, it records the page number of the ledger book on which
relevant account is prepared.
Amount
In this column, it records the amount received on debit side and cash paid
on its credit side.
Preparation of Simple Cash Book
Cash Book is in a way, a cash account with debit and credit side and Cash
account is an asset account, so the rule followed is Increase in assets to be
debited and Decrease in asset is to be credited. This implies that Cash Book
is a book where all the receipts in terms of cash are recorded on the debit
side of the Cash Book and all the payments in terms of cash are recorded
on its credit side. This means :
Cash Book records all transactions related to receipts and payments
in terms of Cash only.
On the debit side in the particulars column, the name of the account, for
which cash is received is recorded. Similarly, on the credit side, the name
of account for which cash is paid, is recorded. In the amount column the
actual cash paid or received is recorded. At the end of the month, cash book
is balanced. The cash book is balanced in the same manner an account is
balanced in the ledger. The total of the debit side of the cash book is
compared with the total of the credit side and the difference if any is entered
on the credit side of the cash book under the particulars column as balance
c/d. In case of Simple Cash Book, the total of debit side is always more
ACCOUNTANCY
121
MODULE - 1
Cash Book
Basic Accounting
Notes
than the total of the credit side, since the payment can never exceed the
available cash. The difference is written in the amount column and total
of the both sides of the cash book becomes equal. The closing balance of
the credit side becomes the opening balance for the next period and is
written as Balance b/d on the Debit side of the Cash Book for the following
period.
Recording of cash transactions in the Simple Cash Book and its balancing
is illustrated with the help of the following illustrations :
Illustration 1
Enter the following transactions in the cash book of M/s. Rohan Traders:
Date
Details
Amount (Rs.)
2005
December 01
Cash in Hand
27,500
December 05
12,000
December 08
2,000
December 10
Furniture purchased
6,000
December 14
16,500
December 18
26,000
December 22
December 25
December 28
5,000
December 30
Rent paid
4,000
December 31
Salary paid
7,000
3,200
18,700
Solution:
Books of M/s. Rohan Traders
Cash Book
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
2005
122
Date
Particulars
L.F Amount
(Rs)
2005
Dec.01
Balance b/d
27,500
2,000
Dec.05
Nitu
12,000
Dec.10 Furniture
6,000
Dec.14
Sales
16,500
Dec.18 Purchases
26,000
Dec.25
Sales
18,700
Dec.22 Rohini
3,200
5,000
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Dec.30 Rent
4,000
Dec.31 Salary
7,000
21,500
74,700
74,700
2006
Notes
Jan. 01
Balance b/d
21,500
Illustration 2
Prepare Cash Book for the month of April 2006 from the following
particulars :
Date
Details
Amount (Rs.)
2006
April 01
Cash in hand
17,600
April 03
7,500
April 06
6,000
April 10
500
April 15
3,500
April 17
Cash Sales
April 19
Commission paid
April 21
1,500
April 25
1,700
April 28
Rent paid
3,000
April 30
1,300
10,000
700
Solution:
Cash Book
Dr.
Date
Cr.
Particulars
L.F.
Amount
(Rs)
2006
Date
Particulars
L.F.
Amount
(Rs)
2006
17,600
April 03 Purchases
17 Sales
10,000
10 Wages
500
21 Teena
1,500
15 Neena
3,500
19 Commission
ACCOUNTANCY
7,500
700
123
MODULE - 1
Cash Book
Basic Accounting
25 Furniture
1,700
28 Rent
3,000
30 Electricity Bill
1,300
30 Balance c/d
2006
Notes
29,100
10,900
29,100
10,900
Note : Credit transactions are not recorded in cash book (i.e. a credit sales
to Rohan Rs.6,000 on April 6, 2006)
Posting of Cash Book in the Ledger
As we know that cash receipts are shown on debit side of Cash Book and
the cash payments are shown on the credit side of Cash Book. Account
appearing on the debit side of the Cash Book is posted on the credit side
in the relevant ledger. Similarly, account appearing on the credit side of Cash
Book is posted on the debit side of the relevant ledger.
Cash Book in itself is a Cash account, so no separate cash account will be
maintained in the ledger.
For the posting of various cash book entries in the ledger, refer illustration
No. 2.
(a) Posting of Debit side of Cash Book :
Sales Account
Dr.
Date
Cr.
Particulars
Particulars
(Rs)
L.F. Amount
(Rs)
2006
April 17
Cash
10,000
Teena Account
Dr.
Date
Cr.
Particulars
Particulars
(Rs)
L.F. Amount
(Rs)
2006
April 21
124
Cash
1,500
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Cr.
Particulars
Particulars
(Rs)
L.F.
Amount
Notes
(Rs)
2006
April 03
Cash
7,500
Wages Account
Dr.
Date
Cr.
Particulars
Particulars
(Rs)
L.F. Amount
(Rs)
2006
April 10
Cash
500
Neenas Account
Dr.
Date
Cr.
Particulars
Particulars
(Rs)
L.F. Amount
(Rs)
2006
April 10
Cash
3,500
Commission Account
Dr.
Date
Cr.
Particulars
Particulars
(Rs)
L.F. Amount
(Rs)
2006
April 19
Cash
700
Furniture Account
Dr.
Date
Cr.
Particulars
Particulars
L.F. Amount
(Rs)
2006
April 25
Cash
ACCOUNTANCY
1,700
125
MODULE - 1
Cash Book
Basic Accounting
Rent Account
Dr.
Cr.
Date
Particulars
Particulars
L.F. Amount
(Rs)
Notes
(Rs)
2006
April 28
Cash
3,000
Cr.
Date
Particulars
Particulars
L.F. Amount
(Rs)
(Rs)
2006
April 30
Cash
1,300
Transactions
Debit side
Credit side
126
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Cr
Particulars
L.F
Cash
Bank
(Rs)
(Rs)
Date
Particulars
L.F
Cash
Bank
(Rs)
(Rs)
Opening balance
(ii)
Receipt of cheques
Bank charges
ACCOUNTANCY
127
MODULE - 1
Cash Book
Basic Accounting
bank (from his bank account) and the closing bank balance of a month is
a credit balance. This balance amount is called Bank overdraft. It is written
on the credit side of the bank column of the cash book as opening balance.
For example, if a business firm has Rs.12,000 as cash in hand and Rs.15,000
as overdraft (credit balance) in the bank, it will be recorded as under:
Notes
Bank Column Cash Book
Dr
Cr
Date Particulars
L.F.
Balance b/d
Cash
(Rs)
(Rs)
12,000
L.F
Cash
Bank
(Rs)
(Rs)
Balance b/d
15,000
Cr
Particulars
L.F
Cash
(Rs)
(Rs)
L.F
Cash
Bank
(Rs)
(Rs)
2006
May 2 Tarun
7,000
In case, this cheque is deposited on May 10, 2006 the entry on May 02,
2006 is as under:
Bank Column Cash Book
Dr
Date
Cr
Particulars
May 2 Tarun
128
L.F
Cash
(Rs)
L.F
Cash
(Rs)
Bank
(Rs)
7,000
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Notes
Cr
Date Particulars
L.F
Cash
(Rs)
Bank
(Rs)
Date Particulars
L.F
Cash
(Rs)
Bank
(Rs)
2006
May
15
May
Bank
2,000
15
Cash
2,000
Cr
Date Particulars
L.F
Cash
(Rs)
Bank
(Rs)
Date Particulars
Cash
2006
May
22
May
J.P.Traders
(Cheque)
ACCOUNTANCY
8,000
27
Kapila Traders
(Cheque)
8,000
129
MODULE - 1
Cash Book
Basic Accounting
Notes
If bank charges any interest, outstation cheque collection charges etc. are
entered on the credit side of the Bank column of the Cash Book. Similarly,
if bank gives interest, collects commission etc., these will be recorded on
the debit side on the Bank column Cash Book.
Illustration 3
Record the following transactions in the Bank column Cash Book of
M/s Time Zone for the month of January 2006.
Date
Details
Amount (Rs.)
2006
January 01 Bank Balance
32,500
01 Cash Balance
12,300
5,300
9,500
5,400
7,900
1,000
10,000
22 Paid Cartage
500
7,000
3,000
30 Paid Salary
3,500
Solution:
Bank Column Cash Book
Dr
Cr
Date
Particulars
L.F
Cash
(Rs)
Bank Date
(Rs)
Particulars
L.F Cash
(Rs)
Bank
(Rs)
2006
Jan 1 Balance b/d
8 Sales
15 Sales
130
5,300
9,500
10 Typewriter
5,400
17 Stationery
1,000
7,900
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
20 Cash
10,000
20 Bank
10,000
22 Cartage
500
24 Mudit
7,000
28 Rent
3,000
3,500
31 Balance c/d
7,800 28,700
21,800 50,400
Feb 1 Balance b/d
7,800
Notes
30 Salary
21,800 50,400
28,700
Illustration 4
Enter following transactions in the Bank column cash Book of M/s Tea
Traders for April 2006
Date
Details
Amount (Rs.)
2006
April 01 Commenced business with Cash
60,000
45,000
7,000
5,000
6,000
18 Cash Sales
10,000
300
3,000
2,000
Solution:
Bank Column Cash Book
Dr
Cr
Date
Particulars
L.F
Cash
(Rs)
Bank
(Rs)
2006
Date Particulars
L.F Cash
(Rs)
Bank
(Rs)
2006
60,000
C
15 Manjula
18 Sales
20 Bank (cheque)
ACCOUNTANCY
Apri1 3 Bank
45,000
5 Purchases
6,000
10 Office Machine
10,000
20 Cash (Cheque)
6,000
22 Wages
45,000
7,000
5,000
6,000
300
131
MODULE - 1
Cash Book
Basic Accounting
25 Drawings
3,000
30 Rent
2,000
30 Balance c/d
13,000 45,700
76,000 51,000
Notes
76,000 51,000
13,000 45,700
Illustration 5
Prepare Bank Column Cash Book from the following information for
December 2006
Date
Details
Amount (Rs.)
2006
Dec 1 Cash in hand
10,500
1 Bank Overdraft
9,500
4 Paid Wages
400
6 Cash Sales
10,000
5,000
6,000
4,000
1,200
22 Rent paid
2,300
1,500
27 Commission paid
2,000
29 Salary paid
3,500
3,000
Solution:
Bank Column Cash Book
Dr
Cr
Date Particulars
L.F
Cash
(Rs)
2006
Dec 1
132
L.F
Cash
(Rs)
Bank
(Rs)
2006
Balance b/d
10,500
Dec 1
Sales
10,000
wages
Cash
5,000
Bank
15
Cash
4,000
13
Purchases
25
Rahul
15
Bank
1,500
Balance b/d
9,500
400
C
5,000
6,000
4,000
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
31 Balance b/d
10,700
18 Trade Expenses
1,200
22 Rent
2,300
27 Commission
2,000
29 Salary
3,500
31 Purchases
31 Balance c/d
22,000
Jan 1 Balance b/d
19,700
4,800
Notes
3,000
4,800
22,000 19,700
10,700
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec. 6
Cash
10,000
Rahul Account
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec. 25
ACCOUNTANCY
Cash
1,500
133
MODULE - 1
Cash Book
Basic Accounting
Cr.
Particulars
L.F
Notes
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec.13
Bank
6,000
Dec.31
Bank
3,000
Wages Account
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec. 4
Cash
400
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec.18
Bank
1,200
Commission Account
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec. 27 Cash
2,000
Salary Account
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
2006
Dec.29
134
Cash
3,500
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Rent Account
Dr.
Date
Cr.
Particulars
L.F
Amount
(Rs)
Date
Particulars
L.F
Amount
(Rs)
Notes
2006
Dec. 22 Cash
2,300
(ii)
When transactions relate to both cash and bank side of Bank Column
Cash Book, Such transactions are known as ..................
(vi) When cheque received from customer is given to some other party
it is called ..................
7.3 PETTY CASH BOOK : MEANING AND NEED
In big business organisations, a large number of repetitive small payments
such as, for conveyance, cartage, postage, telegrams, courier and other
expenses are made. These organisations appoint an assistant to the Head
Cashier. The appointed cashier is known as petty cashier. He makes
payments of these expenses and maintains a separate cash book to record
these transactions. Such a cash book is called Petty Cash Book. The petty
cashier works on the imprest system. Under this system, a definite sum, say
Rs. 4000/- is given to the petty cashier at the beginning of the period. This
amount is called imprest money. The petty cashier meets all small payments
out of this imprest amount, At the end of the period say one month he
presents the account to the Head Cashier and gets reimbursed from the Head
Cashier. Suppose out of Rs.4,000 he has spent Rs.3,850 by the end of the
month. He will get Rs.3,850 from the head cashier. Thus, again he has the
ACCOUNTANCY
135
MODULE - 1
Cash Book
Basic Accounting
Notes
full imprest amount in the beginning of the next period. The process of
reimbursement can be weekly, fortnightly or monthly depending upon the
frequency of small payments. The Petty Cashier is authorised to sanction
and disburse small payments. Assignment of the task of making of petty
expenses to a person and the maintenance of petty cash book by him reduces
the burden of the Head Cashier.
The petty cash book has a number of columns for the amount on the payment
side. Each of the amount columns is allotted to items of specific payments,
which are common. The last column is allotted for miscellaneous payments.
At the end of the period, all amount columns are totalled. The total of the
amount paid shown in column 5 is deducted from the column 1. At the
opening of the month the total amount paid in the previous month is
reimbursed by the Head Cashier.
Format of a Petty Cash Book is given as under:
Petty Cash Book (Format)
Amount Date Particulars Voucher Amount
Received
No,
paid (Rs)
Analysis of Payments
Postage Teleph
one &
Telegr
am
1
10
Illustration 6
Mr. Sumit the Petty Cahier of M/s Travels India received Rs 2000 on April
1, 2006 from the Head Cashier. Prepare Petty Cash Book on Imprest System
from the petty payments during the month of April 2006 for the following
items:
Date
Details
Amount (Rs)
2006
April
136
Auto fare
200
Courier services
50
Postage stamps
95
Pencils/Pads
65
40
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
295
Refreshments
310
11
Auto fare
60
13
Telegram
64
16
Computer stationery
19
Bus fare
21
23
Refreshment
80
25
Photostat Charges
45
28
Courier services
40
30
Bus fare
40
Notes
165
40
205
Solution:
Petty cash Book
Amount Date Particulars
Received
Voucher Amount
No.
paid (Rs)
Analysis of Payments
Postage Teleph
one &
Telegr
am
2006
April
2000
01
Cash
received
02
Auto fare
03
Courier
services
50
50
04
Postage
stamps
95
95
05
Pencils/Pads
65
06
Speed Post
Charges
40
08
Taxi fare
295
09
Refreshments
310
11
Auto fare
60
13
Telegram
64
ACCOUNTANCY
200
200
65
40
295
310
60
64
137
MODULE - 1
Cash Book
Basic Accounting
Notes
16
Computer
stationery
165
19
Bus fare
40
21
STD Call
Charges
205
23
Refreshment
80
80
25
Photostat
Charges
45
45
28
Courier
services
40
30
Bus fare
Balance c/d
2000
40
205
40
40
1794
30
165
225
269
595
230
435
206
2000
206
1794
01
Cash received
....................
(ii)
(iii) The amount which is paid to the petty cashier at the beginning of a
period is known as ....................
(iv) Under Imprest system of Petty Cash Book, the Petty Cashier is
reimbursed with the amount equivalent to what he spent during the
....................
Cash Book is a Book in which all cash receipts and cash payments are
recorded. It is also one of the books of original entry.
Type of Cash Book
Simple Cash Book Bank Column Cash Book
138
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
Notes
Contra entries
Transactions that relate to both cash and bank and is entered on cash
column of one side and bank column of other side of Bank Column Cash
Book. Recording of such transactions is known as Contra entries.
TERMINAL QUESTIONS
1. What is Cash Book? Explain the different types of Cash Book.
2. Draw the format of Bank Column Cash Book and write at least five
items in it.
3. What is Contra entry? How will you deal with this entry while preparing
Bank Column Cash Book?
4. What do you mean by Petty Cash Book ? Explain the imprest system
of Petty Cash Book.
5. Enter the following transactions in the Simple Cash Book of M/s Golden
Traders:
2006
Rs.
April
30,000
10,000
3 Furniture Purchased
ACCOUNTANCY
1,000
139
MODULE - 1
Cash Book
Basic Accounting
Notes
9 Cartage paid
7,000
200
10 Postage
100
12 Cash Sales
10,000
13,000
25 Wages paid
27 Rent paid
3,000
28 Cash Sales
2,000
30 Commission received
3,000
500
500
Rs.
March
01 Cash in hand
32,500
8,000
12 Goods Purchased
3,000
2,000
18 Cash Sales
4,000
22 Paid wages
4,000
25 Salary paid
3,000
3,500
31 Rent paid
2,500
140
Rs.
1 Cash in hand
18,000
Cash at Bank
27,500
10,000
16,000
20,000
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
2,000
1,000
4,700
2,000
5,000
22 Wages paid
1,000
26 Cash Sales
5,000
2,000
29 Salary Paid
5,000
31 Rent paid
Notes
2,000
8. Prepare Bank column Cash Book of M/s Style India from the following
transactions for the month of April 2006 :
2006
August
Rs.
1 Cash in hand
18,000
Cash at Bank
27,500
3 Cash Sales
10,000
8,700
13,500
13,000
15 Cash Sales
7,000
8,000
7,000
7,000
24 Rent paid
5,000
5,000
29 Salary paid
3,000
ACCOUNTANCY
500
1,000
141
MODULE - 1
Cash Book
Basic Accounting
9. Prepare Bank Column Cash Book from the following transactions for
the month of March 2006 :
2006
March
Notes
142
Rs.
3,200
16,500
4,000
6,000
2,000
1 Cash in hand
Bank Overdraft
4 Cash Sales
14 Cash Sales
5,000
20 Salary paid
2,000
22 Wages paid
150
27 Cash Sales
2,500
4 Stationery
50
6 Auto fare
60
8 Refreshments
210
10 Courier Services
60
15 Telegram
20
18 Bus fare
30
19 Postage
20
21 Photostat Charges
30
23 Bus fare
20
27 Taxi fare
110
29 Cartage
35
30 Computer Stationery
120
The petty cashier received Rs 1200 from the Head cashier on September
01, 2006.
ACCOUNTANCY
MODULE - 1
Cash Book
Basic Accounting
(i) Cash
(iv) Debit, Credit
II.
S.No
(i)
(ii) Journal
Debit Side
Credit Side
(iv)
(v)
(vi)
(vii)
(viii)
Notes
(ii)
(iii)
Bank/Cash
(iii) Overdraft
(vi) endorsement
petty cashier
6.
7.
8.
9.
10.
ACCOUNTANCY
143
MODULE - 1
Cash Book
Basic Accounting
Activity
Notes
If you ask your friends you may come across a friend who gets pocket
allowance on regular basis from his prarents and who spends it judiciously
and maintains a record of the money spent. He may also be receiving money
from his grand parents and/or from grand maternal parents. Procure the note
book/diary in which your friend keeps the notes regarding receipts and
payments and prepare a Cash Book on the basis of the given information.
Do you know?
Do mosquitoes and other insects spread HIV?
No. The evidence clearly shows that HIV is not spread
by mosquitoes and other insects. The malaria parasite
lives in the body of the mosquito, and is introduced into
the human body when the mosquito bites. HIV lives in
some cells of the human body, but it does not live in the
cells of insects. Therefore, mosquitoes and other insects
cannot transmit HIV. For example, bedbugs, lice, and
fleas in the household of persons living with HIV/AIDS
(PLWHA) do not spread the virus among other members
of the household.
The incidence of HIV infection is the highest among the
sexually active in the 15-45 age group. If mosquitoes and
other insects were a means of spreading HIV, the incidence
of HIV infection would have been uniformly high among
all age groups.
144
ACCOUNTANCY